4 ms·

What bandwidth addiction will cost

6 points by nickb 18y ago

swombat 18y ago
Interesting comparison. Considering that the US hasn't managed to resolve its oil addiction yet, though, I think it's unlikely that this comparison is helpful - except in making people feel helpless. Could you resolve this without government assistance? Perhaps. Maybe a company could sell a device that can be tuned to use whatever spectrum block is desired, and let people pick which bit of the unused spectrum they want to use. The government can't control what everyone does if everyone is doing it.
mdasen 18y ago
Terrible, terrible metaphor. First, power is limited by the laws of nature. A low-efficiency power generator can convert a third of the chemical energy in something like coal into electricity. The best one can possibly do is 100% efficiency meaning we could (should we develop a 100% efficient way to convert energy between forms) triple efficiency, but not more. Bandwidth, on the other hand, keeps seeing increases as things become more efficient. Second, chemical energy cannot be produced. If I wanted to, I could lay new fiber which increases the amount of bandwidth in the world. So, as demand for bandwidth increases, the amount of bandwidth in the world can also increase. As demand for energy increases, energy cannot increase. In fact, this is the largest problem we're facing with oil. Demand is rising, but at a certain point, supply can't rise - there's only so much oil. Sure, there's only so much fiber RIGHT NOW, but more can be made and laid. Third, new entrants can enter the bandwidth arena without displacing old hats. This builds nicely off the second. If one can produce new bandwidth, you can enter without taking/diminishing the bandwidth of another competitor. If all the oil in the world is owned, the only way you can enter is to buy or steal the oil from its previous owner. The fact that there aren't a lot of competitors in the arena is more a matter of the huge amount of capital required. However, we already see a ton of people who have laid fiber - One Summer Street in Boston (a data center) has over 40 different providers connecting through it. The reason that most of our home connections are a monopoly/duopoly is that home connections form a market known as a "natural monopoly". Take water as an example. It doesn't cost much to provide a marginal unit of water to someone's home. It costs a TON to run water pipes to everyone's home. Likewise, providing bandwidth to people isn't the problem - it's running wiring everywhere in a city. It is actually wasteful to have multiple carriers in the economic sense. I mean, let's say that Comcast and Verizon makes a 50% profit when they're the only games in town gouging customers. Their costs are $1bn for the network and 1cent/GB for usage. OK, so two more companies enter the market and face the same costs. Now each carrier has 25% of the market and no one is making any money because they don't have enough customers to cover the cost of the network rollout/maintenance. There's a reason why it's a duopoly, but it's nothing like oil. Ideally, someday, municipalities would take over the job of running the cabling to our home like they do with water and then people could just buy bandwidth from the central office to the internet from any number of providers - taking advantage of the economics of both natural monopolies (not building multiple infrastructures) and competition (having bandwidth providers compete on price for my business). The comparison is simply inaccurate. Energy is a supply-side constricted commodity which means that supply doesn't change relative to demand. Bandwidth increases as demand for it increases - except in one place, wireless. Of course, there's still a lot of airwaves that can be auctioned in the future and wireless carriers have a lot further they can go in efficiency than what we can do with energy. This story does have one value - it's a great, "you're scared about oil prices, I bet you'll read something I write to make you scared about all your other bills even if I'm full of it" story.

6 points by nickb 18y ago

Interesting comparison. Considering that the US hasn't managed to resolve its oil addiction yet, though, I think it's unlikely that this comparison is helpful - except in making people feel helpless. Could you resolve this without government assistance? Perhaps. Maybe a company could sell a device that can be tuned to use whatever spectrum block is desired, and let people pick which bit of the unused spectrum they want to use. The government can't control what everyone does if everyone is doing it.

mdasen 18y ago

Terrible, terrible metaphor. First, power is limited by the laws of nature. A low-efficiency power generator can convert a third of the chemical energy in something like coal into electricity. The best one can possibly do is 100% efficiency meaning we could (should we develop a 100% efficient way to convert energy between forms) triple efficiency, but not more. Bandwidth, on the other hand, keeps seeing increases as things become more efficient. Second, chemical energy cannot be produced. If I wanted to, I could lay new fiber which increases the amount of bandwidth in the world. So, as demand for bandwidth increases, the amount of bandwidth in the world can also increase. As demand for energy increases, energy cannot increase. In fact, this is the largest problem we're facing with oil. Demand is rising, but at a certain point, supply can't rise - there's only so much oil. Sure, there's only so much fiber RIGHT NOW, but more can be made and laid. Third, new entrants can enter the bandwidth arena without displacing old hats. This builds nicely off the second. If one can produce new bandwidth, you can enter without taking/diminishing the bandwidth of another competitor. If all the oil in the world is owned, the only way you can enter is to buy or steal the oil from its previous owner. The fact that there aren't a lot of competitors in the arena is more a matter of the huge amount of capital required. However, we already see a ton of people who have laid fiber - One Summer Street in Boston (a data center) has over 40 different providers connecting through it. The reason that most of our home connections are a monopoly/duopoly is that home connections form a market known as a "natural monopoly". Take water as an example. It doesn't cost much to provide a marginal unit of water to someone's home. It costs a TON to run water pipes to everyone's home. Likewise, providing bandwidth to people isn't the problem - it's running wiring everywhere in a city. It is actually wasteful to have multiple carriers in the economic sense. I mean, let's say that Comcast and Verizon makes a 50% profit when they're the only games in town gouging customers. Their costs are $1bn for the network and 1cent/GB for usage. OK, so two more companies enter the market and face the same costs. Now each carrier has 25% of the market and no one is making any money because they don't have enough customers to cover the cost of the network rollout/maintenance. There's a reason why it's a duopoly, but it's nothing like oil. Ideally, someday, municipalities would take over the job of running the cabling to our home like they do with water and then people could just buy bandwidth from the central office to the internet from any number of providers - taking advantage of the economics of both natural monopolies (not building multiple infrastructures) and competition (having bandwidth providers compete on price for my business). The comparison is simply inaccurate. Energy is a supply-side constricted commodity which means that supply doesn't change relative to demand. Bandwidth increases as demand for it increases - except in one place, wireless. Of course, there's still a lot of airwaves that can be auctioned in the future and wireless carriers have a lot further they can go in efficiency than what we can do with energy. This story does have one value - it's a great, "you're scared about oil prices, I bet you'll read something I write to make you scared about all your other bills even if I'm full of it" story.